EXHIBIT B-2(a)
AMENDED AND RESTATED
SERVICE AGREEMENT
BETWEEN
ENTERGY SERVICES, INC.
AND
ENTERGY POWER, INC.
THIS AGREEMENT, made and entered into as of June 22, 1999 by
and between Entergy Services, Inc., a corporation organized under
the laws of the State of Delaware (hereinafter sometimes referred
to as "Service Company") and Entergy Power, Inc., a corporation
organized under the laws of the State of Delaware (hereinafter
sometimes referred to as "EPI"), amends, restates and supercedes
in its entirety that certain Service Agreement made and entered
into as of August 28, 1990, between Service Company and EPI, as
heretofore amended by Amendments, effective January 1, 1991,
January 1, 1992, January 1, 1996, January 1, 1998 and January 1,
1999 (the "Original Service Agreement").
W I T N E S S E T H:
WHEREAS, Service Company and EPI are both direct
subsidiaries of Entergy Corporation ("Entergy") and Entergy
Power, Inc., together with Entergy and its other direct and
indirect subsidiaries ("Client Companies") form the Entergy
System; and
WHEREAS, Service Company is organized, staffed and equipped
and is authorized by the Securities and Exchange Commission (the
"Commission") as a subsidiary service company under Section 13 of
the Public Utility Holding Company Act of 1935, as amended (the
"Act") to render to Client Companies certain services and to
render to EPI services as herein provided; and
WHEREAS, in the performance of past and future services for
the Client Companies, Service Company has acquired and will
acquire certain properties and other resources; and
WHEREAS, EPI is authorized under the Act by order of the
Commission dated August 27, 1990 to utilize those services,
personnel, properties and other resources of Service Company; and
WHEREAS, economies and increased efficiencies benefiting
the Entergy System will result from the performance by Service
Company of services for EPI and the provision of certain property
and resources to EPI as herein provided; and
WHEREAS, subject to the terms and conditions herein
described, Service Company is willing, upon request by EPI, to
render such services and provide such property and resources to
EPI; and
WHEREAS, pursuant to settlement arrangements entered into by
Entergy with certain of its state and local regulators in 1992
and 1993 (collectively, the "Settlement Agreements"), Entergy has
agreed (subject to the receipt of any requisite Commission
authorization) to implement certain special provisions pertaining
to affiliate transactions between Entergy's Regulated Utilities
and Nonregulated Businesses (each as defined in the Settlement
Agreements), including, without limitation, a provision requiring
that any services rendered by Entergy's Regulated Utilities
(including Service Company) to Nonregulated Businesses (including
EPI), be priced at cost plus 5%; and
WHEREAS, by Order dated June 22, 1999 (HCAR No. 27040), the
Commission granted Entergy's application requsting, among other
things, an exemption from the "at cost" requirements of Section
13(b) of the Act to permit implementation of the provision of the
Settlement Agreements requiring that services rendered by Service
Company to EPI be priced at cost plus 5%; and
WHEREAS, it is necessary and appropriate to amend the
Original Service Agreement for the purpose, among other things,
of incorporating the above referenced provision of the Settlement
Agreements.
NOW THEREFORE, in consideration of the premises and of the
mutual agreements herein, the parties hereto hereby agree as
follows:
1. Definitions.
In addition to those terms elsewhere defined in this
Agreement, the term, "Services" shall mean the services described
in Article 3 hereof, unless the context otherwise requires.
2. Agreement to Furnish Services.
A. Upon its receipt of EPI's service request, Service
Company agrees to furnish to EPI upon the terms and
conditions hereinafter set forth such of the Services
requested by EPI, at such times, for such periods and in
such manner as EPI shall have requested. Service Company
will keep itself and its personnel available and competent
to render to EPI the Services on the same basis as such
Services are provided the other Client Companies.
B. Upon its receipt of EPI's service request, Service
Company will, if it has or can have available the personnel
and resources needed to fill the service request, furnish to
EPI upon the terms and conditions hereinafter set forth such
of the Services, at such times, for such periods and in such
manner as EPI may from time to time request; provided,
however, that the determination of whether Service Company
has the available personnel and resources to perform in
accordance with the service request will be entirely within
the discretion of Service Company, and Service Company may
at its sole option elect not to perform any requested
Services, except that, once having agreed to perform
pursuant to a service request, Service Company shall not
withdraw or depart from such performance without the consent
of EPI.
C. The providing of Services by Service Company
pursuant to this Agreement shall in all cases and
notwithstanding anything herein contained to the contrary be
subject to any limitations contained in authorizations,
rules or regulations of those governmental agencies, if any,
having jurisdiction over Service Company, EPI, or such
providing of Services.
3. Description of Services.
The Services to be provided by Service Company hereunder
may, upon request, include the following:
A. General Executive and Advisory Services. Advise and assist
the officers and employees of EPI in connection with various
phases of its business and operations, including particularly
(but not exclusively) those phases which involve coordination of
planning or operations between EPI and other entities.
B. General Engineering. Perform general engineering work,
including system production and transmission studies; prepare and
analyze apparatus specifications, distribution studies and
standards, civil engineering and hydraulic studies and problems,
and fuel supply studies; and advise and assist in connection with
analyses of operations and operating and construction budgets.
C. Design Engineering. Perform detailed design work as
requested by EPI.
D. Purchasing. Render purchasing and group purchasing services
to EPI, coordinate group purchasing, and supply expediting
services. All requests for bids shall be made by and purchases
confirmed in the name of EPI (or its customer, if requested by
EPI).
E. Accounting and Statistical. Perform for EPI all such
business, accounting, and auditing services and install such
internal accounting and auditing procedures as are requested by
EPI or its customers to maintain its or their books and records
properly and account for and safeguard its operations and
properties; advise and assist EPI in connection with the
installation of accounting systems and similar efforts,
requirements of regulatory bodies with respect to accounting,
studies of accounting procedures and practices to improve
efficiency, accounting entries resulting from financial
transactions, internal audits, employment of independent
auditors, preparation and analyses of financial and operating
reports and other statistical matters relating to EPI or its
customers, preparation of reports to regulatory commissions,
insurance companies and others, standardization or accounting and
statistical forms in the interest of economy, and other
accounting and statistical matters.
F. Finance and Treasury. Advise and assist Entergy Power on
financing matters, including short and long range financial
planning, determination of types and times of sales of
securities, preparation of petitions and applications for the
issuance of securities and the preparation of various documents
required in connection therewith, negotiation and structuring of
financing arrangements, and all treasury matters, including
banking and investment of surplus funds.
G. Taxes. Advise and assist EPI in connection with tax
matters, including preparation of Federal, State or foreign
income and other tax returns and of protests, claims and briefs
where necessary, tax accruals, and other matters in connection
with any applicable taxes, governmental fees or assessments, and
assistance in connection with audit of returns by the Internal
Revenue Service and State Tax Agencies.
H. Risk Management. Advise and assist EPI in connection with
risk management matters including but not limited to insurance
and bonding, including contracts with insurers, trustees and
actuaries and the placing of individual or blanket/group policies
covering EPI and/or other Client Companies or its or their
customers, and other insurance and bonding problems as required.
I. Employee Benefits. Advise and assist EPI in connection with
employee benefit matters including but not limited to welfare and
pension matters.
J. Corporate. Advise and assist EPI in connection with
corporate affairs, including assistance and suggestions in
connection with the preparation of petitions and applications for
the issuance of securities, contracts for the sale of
underwriting of securities, maintenance of minutes of directors'
and stockholders' meetings and other proceedings and of other
related corporate records; and also arrangements for stockholders
meetings, including notices, proxies and records thereof, and for
other types of meetings.
K. Budgeting. Advise and assist EPI in matters involving the
preparation and development of capital and operating budgets,
cash and cost forecasts, and budgetary controls and preparation
of long-range forecasts.
L. Business Promotion and Public Relations. Advise and assist
EPI in the development of marketing and sales programs, in the
preparation and use of advertising and sales materials, and in
the determination and carrying out of promotional programs.
M. Employee Services. Furnish EPI with advisory and
administrative services and programs in connection with employee
and employee relations matters, payroll, recruitment, employee
placement, training, compensation, safety, labor relations and
health, welfare and employee benefits.
N. Systems and Procedures. Advise and assist EPI in the
establishment of sound operating practices and methods of
procedure, the standardization of forms, the purchase, rental and
use of mechanical and electronic data processing and
communications equipment, in conducting economic research and
planning and in the development of special economic studies.
O. Regulatory Matters. Consultation and advice with respect to
regulatory matters, particularly those involving the Securities
and Exchange Commission or the Federal Energy Regulatory
Commission, and the provision of liaison and assistance in
processing matters with the staffs of such commissions.
P. Systems Operations Center. Operation of a System Operations
Center for the control of bulk power supply and load dispatching
within the Entergy System, with EPI, and with interconnected
systems.
Q. Data Processing Services. Operation of a data processing
Computer center to serve the Entergy System. This operation may
include: applications software development, maintenance and
enhancements; data communications network design, operation and
management; Computer Center production operations; and
information systems consulting.
R. Access to and Use of Resources. Make available to EPI in
the conduct of its business and/or, to the extent necessary or
appropriate as required in the performance of its services to its
customers, access to, use of, or rights in all Service Company's
resources, including facilities, products, processes, techniques,
computer hardware and software, technical information, training
aids and properties, vehicles, equipment, machines and other
property, whether owned, leased or licensed by or otherwise to
Service Company.
S. Training. Assist EPI in providing training to personnel of
EPI or its customers; develop and make available training
procedures, materials and facilities, and provide instructors.
T. Legal Services. Provide services and advice relating to
litigation, contracts, leases, real estate, property rights and
other legal matters.
U. General. Make available services in the areas of
construction, planning and supervision, design, management,
programs, quality assurance, licensing matters, research and
development, and communications systems and procedures.
V. Other Services. Render advice and assistance in connection
with such other matters as EPI may request and Service Company
may be able to perform with respect to EPI's business and
operations.
4. Compensation of Service Company.
As compensation for Services actually requested by EPI and
rendered to it by Service Company, EPI hereby agrees to pay to
Service Company an amount equal to (a) the cost of such Services,
computed in accordance with applicable rules and regulations
(including, but not limited to, Rules 90 and 91) under the Act
and appropriate accounting standards, plus (b) a charge of 5% of
such cost. The cost of Services under (a) above shall include
direct charges and EPI's pro rata share of certain of Service
Company's costs and shall be determined as outlined in Exhibits I
and II attached hereto and incorporated herein by reference.
Bills for Services will be rendered on or before the 15th day of
the succeeding month and will be payable on or before the 25th
day of such month.
5. Work Orders.
The Services will be performed in accordance with work
orders or requests issued or made by or on behalf of EPI and
accepted by Service Company, and all Services will be assigned an
applicable work order number to enable specific work to be
properly allocated by project or other appropriate basis. Work
orders shall be as specific as practicable in defining the
Services requested to be performed and shall set forth the scope
and duration of the Services to be performed pursuant to the
service request. EPI shall have the right from time to time to
amend, alter or rescind any work order, provided that (i) any
such amendment or alteration which results in a material change
in the scope of the work to be performed or equipment to be
provided is agreed to by Service Company, (ii) the costs for the
Services covered by the work order will include any expense
incurred by Service Company as a direct result of such amendment,
alteration or rescission of the work order, and (iii) no
amendment, alteration or rescission of a work order will release
EPI from liability for all such costs already incurred or
contracted for by Service Company pursuant to the work order,
regardless of whether the work associated with such costs has
been completed.
6. Miscellaneous.
This Agreement shall be binding upon the successors and
assigns of the parties hereto, provided that Service Company
shall not be entitled to assign or subcontract out any of its
obligations under this Agreement or under any purchase order or
service request issued hereunder without the prior written
approval of EPI. This Agreement shall be construed and enforced
under and in accordance with the laws of the State of Arkansas.
This Agreement may be executed in counterparts, each one of which
when fully executed shall be deemed to have the same dignity,
force and effect as an original. No provision of this Agreement
shall be deemed waived nor breach of this Agreement consented to
unless such waiver or consent is set forth in writing and
executed by the party hereto making such waiver or consent.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their respective corporate names by
their respective Presidents or one of their respective Vice
Presidents as of the day and year first above written.
ENTERGY SERVICES, INC.
By: /s/ C. Xxxx Xxxxxx
C. Xxxx Xxxxxx
Executive Vice President and
Chief Financial Officer
ENTERGY POWER, INC.
By: /s/Xxxxxx X. XxXxxx
Xxxxxx X. XxXxxx
Vice President and Treasurer
EXHIBIT I
ENTERGY POWER, INC.
Billing Procedure by
Entergy Services, Inc.
I. Introduction
This procedure establishes the guidelines for determining the
cost of Services for xxxxxxxx by Entergy Services, Inc. ("ESI")
to Entergy Power, Inc. ESI employs a computer based work order
system for the accumulation of costs and the allocation and
billing of those costs to its client companies. These client
companies are primarily the affiliated (Entergy System)
companies. The current ESI accounting system has been designed
to facilitate compliance with the FERC Uniform System of Accounts
and generally accepted accounting principles. All bills by ESI
are at cost, plus a charge of five percent (5%) of such cost.
The procedures to be employed in determining costs of Services
performed for Entergy Power, Inc. will follow the procedures
outlined in Exhibit II.
II. Method of Billing Entergy Power, Inc.
All Services performed by ESI for Entergy Power, Inc. will be
accounted for using the automated work order system. Sources of
this system are:
Payroll (time reports)
Accounts Payable (expense accounts and vendor invoices)
General Accounting Journal Entries
Charges for services rendered will be billed at cost plus five
percent (5%) on or before the 15th day of the succeeding month.
All amounts billed will be payable by Entergy Power, Inc. on or
before the 25th day of such month.
III. Xxxxxxxx
Xxxxxxxx of work orders to Entergy Power, Inc. will be made on a
predetermined basis. It is expected that the xxxxxxxx will be 100
percent to Entergy Power, Inc. Should there be instances where
services are jointly provided to other System Companies, costs
will be allocated on an equitable basis and Entergy Power Inc.'s
share of such costs will be subject to an additional five percent
(5%) charge.
EXHIBIT II
METHODS OF ALLOCATING COSTS AMONG CLIENT COMPANIES RECEIVING
SERVICE UNDER THIS AND SIMILAR SERVICE AGREEMENTS WITH
ENTERGY SERVICES, INC. (ESI)
1. The cost of rendering services by ESI will include all
costs of doing business including interest on debt but
excluding a return for the use of ESI's initial equity
capital amount of $20,000.
2. (a) ESI will maintain a separate record of the expenses of
each department. The expenses of each department will
include:
(i) those expenses that are directly attributable to such
department, and
(ii) an appropriate portion of those office and housekeeping
expenses that are not directly attributable to a department but
which are necessary to the operation of such department.
(b) Expenses of the department will include salaries and wages
of employees, including social security taxes, vacations, paid
absences, sickness, employee disability expenses, and other
employee welfare expenses, rent and utilities, materials, and
supplies, depreciation, and all other expenses attributable to
the department.
(c) Departmental expenses will be categorized into one of two
classes:
(i) those expenses which are directly attributable to specific
services rendered to a Client Company or group of Client
Companies (Departmental Direct Costs), and
(ii) those expenses which are attributable to the overall
operation of the department and not to a specific service
provided to Client Companies (Departmental Indirect Costs).
Departmental Indirect Costs include:
(l) Administrative labor costs associated with office and
general service employees described in Section 3(a). This would
include not only the salaries and wages of these employees but
also other related employment costs described in Section 2(b)
above.
(2) Occupancy costs including rent and utilities.
(3) Depreciation.
(4) Materials and supplies, telephone use, postage, etc.
(5) Other costs attributable to a department.
(b) The indirect expenses of the department will not include:
(i) those incremental out-of-pocket expenses that are incurred
for the direct benefit and convenience of a Client Company or a
group of Client Companies and are to be directly charged to such
Client Company or group of Client Companies; and
(ii) ESI's overhead expenses that are attributable to maintaining
the corporate existence of ESI, franchise and other general
taxes, and all other incidental overhead expenses including those
auditing fees and accounting department expenses attributable to
ESI (Indirect Corporate Costs).
(e) ESI will establish annual budgets for controlling the
expenses of each service department and those expenses
outlined above in Section 2(d) which are not department
specific.
3. (a) Employees in each department will be divided into two
classes:
(i) Those employees rendering service to Client Companies (Class
A), and
(ii) Those office and general service employees, such as
secretaries, stenographers, telephone operators and file clerks,
who generally assist employees in Class A or render other house-
keeping services and who are not engaged directly in rendering
service to a Client Company or a group of Client Companies. In
the event that any such office or general service employees are
assigned to functions that are attributable to services being
performed for Client Companies, such employees shall be
reclassified as Class A employees.
(b) Expenses set forth in Section 2 above will be separated to
show:
(i) salaries and wages of Class A employees, and
(ii) all other expenses of the department.
(b) Class A employees in each department will maintain a record
of the time they are employed in rendering service to each Client
Company or group of Client Companies. The hourly rate for each
Class A employee will be determined each month.
4. (a) The charge to Client Company or a group of Client
Companies for a particular service will be the sum of
the figures derived by multiplying the hours reported
by each Class A employee in rendering such service by
the hourly rate applicable to such employee and other
direct allocated expenses.
(b) Departmental Indirect Costs as defined in Section
2(c)(ii) will be allocated in proportion to the direct
salaries and wages charged.
5. Those expenses of ESI that are not included in the expense
of a department under Section 2 above will be charged to Client
Companies receiving service as follows:
(a) Incremental out-of-pocket costs incurred for the direct
benefit and convenience of a Client Company or a group of Client
Companies will be charged direct to such company or group of
companies.
(b) The Indirect Corporate Costs of ESI referred to above in
Section 2(d)(ii) will be allocated among the Client Companies in
the same proportion as the charges to the Client Companies,
excluding Indirect Corporate Costs.
(c) If the method of allocation of Departmental Indirect Costs
(Section 4(b)), or Indirect Corporate costs (Section 5(b)), would
result in an inequity because of a change in operation or
organization of the Client Companies, then ESI may adjust the
basis to effect an equitable distribution. Any such change in
allocation shall be made only after first giving to the
Commission written notice of such proposed changes not less than
60 days prior to the proposed effectiveness of any such change.
6. On the basis of the foregoing, monthly bills will
be rendered to Client Companies. Billing procedures and
amounts will be open to audit by Client Company and by any
regulatory authority having jurisdiction in respect of the
Client Company.
7. When services are rendered to a group of Client Companies,
costs of such service shall be allocated equitably among the
Companies based on the nature and scope of the service
rendered according to the formulae outlined in Exhibit II,
Supplement.
EXHIBIT II
Supplement
ALLOCATION FORMULAE FOR
GROUPS OF CLIENT COMPANIES
Note: Each allocation formula will be based on data relevant to
participating Client Companies to whom the services are provided
and the department providing the service.
ENERGY SALES
Based on total kilowatt-hours of energy sold to consumers.
Used primarily for the allocation of costs associated with the
financial analyses of sales and related items.
CUSTOMERS
Based on a twelve-month average of residential, commercial,
industrial, government, and municipal general business electric
and gas customers.
Used primarily for the allocation of costs associated with the
support of customer based services. Would include customer
service and support, marketing, economic forecasts, environmental
services, financial and regulatory analyses and customer
information systems.
EMPLOYEES
Based on the number of full-time employees at period end.
Used primarily for the allocation of costs associated with the
support of employee-based services. Would include administration
of employee benefits programs, employee communications, employee
training, various facilities-based benefits and information
technology desktop support.
RESPONSIBILITY RATIO
Based on the ratio of the company's load at time of system peak
load. The peak load is the average of the twelve monthly highest
clock-hour demands in kilowatts of the interconnected system
occurring each month coincident with the system peak load.
Used primarily for the allocation of costs incurred in fossil
plant support and integrated planning.
COMPOSITE - TRANSMISSION. DISTRIBUTION/CUSTOMER SERVICE
Based on four components of equal weighting: kilowatt-hour energy
sales; average customers; number of distribution and customer
service/support employees; and the Transmission/Substation
Composite Allocation Method.
Used primarily for the allocation of costs incurred in the
support of the overall transmission and distribution system of
Entergy's Operating Companies. These costs are related to sales,
transmission lines or substations, customers or customer
service/support employees.
TRANSMISSION LINE MILES
Based on the number of miles of transmission lines, weighted for
design voltage (Voltage ~ 400kv = 1; Voltage >=400kv =2).
Used primarily for the allocation of costs associated with
project design, maintenance and installation of Entergy
transmission lines.
SUBSTATIONS
Based on the number of high voltage substations weighted for
Voltage (Voltage < 500kv = 1; Voltage >= 500kv = 2).
Used primarily for the allocation of related engineering and
technical support for transmission and distribution substation
operations and maintenance as well as for engineering and project
management associated with substation construction.
COMPOSITE - TRANSMISSION LINES/SUBSTATIONS
Based on two components: Transmission Line Miles (30% weighting)
and the Number of High Voltage Substations (70% weighting).
Used primarily for the allocation of the costs associated with
the support of the transmission and distribution function that
have both a transmission line component as well as a substation
or load component.
GAS CONSUMPTION
Based on the volume of natural gas consumed annually by all gas
fired generating units within the Entergy System.
Used for the allocation of costs associated with services in
support of gas purchased for gas fired generation units.
TAX INCOME AND DEDUCTION RATIO
Based on the prior years' Federal Income Tax return, total Income
and Deductions.
Used for the allocation of costs associated with the preparation
of consolidated Federal income tax returns and research of
Federal tax issues.
LEVEL OF ESI SERVICE
Based on ESI total xxxxxxxx to each System company, excluding
corporate overhead.
Used for the allocation of costs associated with support of ESI
as a legal entity.
SYSTEM CAPACITY (NON-NUCLEAR)
Based on the power level, in kilowatts, that could be achieved if
all non-nuclear generating units were operating at maximum
capability simultaneously.
Used primarily for the allocation of costs associated with the
support of the fossil operations of the System. This would
include services provided by plant support, environmental and
purchasing.
LABOR DOLLARS BILLED
Based on total labor dollars billed to each company.
Used primarily to allocate the costs associated with employee
benefits plans, payroll taxes, departmental indirect costs and
performance based compensation plans for ESI employees.
DISTRIBUTION LINE MILES
Based on the number of miles of distribution lines of 34.5kv or
less.
Used primarily for the allocation of costs associated with
project design, maintenance and installation of Entergy
distribution lines.
COAL CONSUMPTION
Based on the quantity of tons of coal delivered for a twelve
month period to each coal plant within the Entergy System.
Used for the allocation of costs associated with services in
support of coal purchased for coal generating units
ACCOUNTS PAYABLE TRANSACTIONS
Based on the number of accounts payable transactions processed
annually for each Entergy System Company.
Used for the allocation of costs associated with the support of
the accounts payable function.
SQUARE FOOTAGE
Based on square footage occupied by ESI functional business
units.
Used primarily to allocate the costs associated with facilities
supervision and support.
INSURANCE PREMIUMS (NON-NUCLEAR)
Based on non-nuclear insurance premiums.
Used for the allocation of costs associated with risk management.
ASSET RECORDS
Based on the number of asset records at period end.
Used for the allocation of costs associated with the fixed asset
accounting function.
AVERAGE OUTSTANDING CAPITAL EXPENDITURE AUTHORIZATIONS (CEA'S)
Based on a twelve-month average of outstanding CEA's.
Used for the allocation of costs associated with the capital
project costing accounting function.
TOTAL ASSETS
Based on total assets at period end.
Used primarily to allocate costs associated with the oversight
and safeguarding of corporate assets. This would include services
provided by financial management and certain finance functions,
among others. Also used when the services provided are driven by
the relative size and complexity of the System Companies and
there is no functional relationship between the services and any
other available allocation formula.
BANK ACCOUNTS
Based on the number of bank accounts at period end.
Used for the allocation of costs associated with daily cash
management activities.
COMPUTER USAGE COMPOSITE
Based on three components: Customers (52% weighting), General
Ledger Transactions (29% weighting) and Employees (19%
weighting), with weighting based on historical usage.
Used primarily for the allocation of costs associated with the
mainframe computer, unix servers and related database
administration.
GENERAL LEDGER TRANSACTIONS
Based on the number of general ledger transactions for the
period.
Used primarily for the allocation of costs associated with
general ledger activities, including related information systems,
and for general accounting activities.
CUSTOMERS AND EMPLOYEES COMBINATION
Based on the equal weighting of a twelve-month average of
residential, commercial, industrial, government and municipal
general business electric and gas customers and on the number of
full-time employees at period end.
Used primarily for systems that support both customers and
employees.
FIBER
Based on capacity and use of the Entergy System's fiber optic
network.
Used primarily for the allocation of fiber optic operations and
maintenance expenses.
